State Legislature is Putting South Sound Businesses Under Attack

The first week of Washington’s 2026 legislative session highlights a fast‑moving and challenging environment, shaped by a $2.3 billion projected budget shortfall, intensified political pressures, and the early influence of the 2026 election cycle. Lawmakers are navigating urgent fiscal constraints, competing policy priorities, and potential new taxes and service reductions.

Governor Ferguson’s proposed operating, capital, and transportation budgets, required by law to balance over four years, attempt to close the deficit through a mix of spending cuts and one‑time measures. These include drawing approximately $1 billion from the rainy-day fund, redirecting Climate Commitment Act revenues to general budget needs, and implementing nearly $800 million in agency reductions. Critics caution this approach may weaken long‑term climate and fiscal stability.
 
A wide array of revenue proposals has been introduced, including new payroll taxes, expanded property and real estate taxes, excise taxes on utilities and consumer goods, surcharges tied to executive compensation, and increased taxes on nicotine, alcohol, firearms, and technology companies. While substantial, these measures will not generate funds quick enough to cover Washington’s immediate budget obligations.
 
Following $8 billion in cuts last session, any further reductions will be even more difficult. The Legislature faces a dual challenge: addressing an urgent short‑term budget crisis while planning for a 2027–29 biennium that is also expected to bring significant fiscal strain.
 
Already, revenue proposals are part of the biennium’s conversation, including the following:

• HB 2100 (Scott, D-43) - creates a payroll tax on 5% of salaries above $125,000 for companies that gross more than $5 million, had employee wages more than $7 million in the previous year and have more than 20 employees.
• SB 5796 (Saldaña, D-37) - creates a payroll tax of 5% on salaries of $189,371 or more against the portion of salary above the Social Security wage limit for employers with more than $7 million in payroll expenses.
• HB 1320 (Street, D-37) - increases taxes 10-12%  on certain businesses.
• HB 1560 (Reed, D-36) - creates a new tax on health care entities based on the salaries of their executives.
• HB 1785 (Doglio, D-22) - imposes a surcharge on certain companies based on the salaries of their executives.
• HB 2098 (Reed, D-36) - eliminates the $75 million cap on the advanced computing surcharge, increasing the tax on tech companies. 
• HB 1921 (Fey-D, 27) - establishes a road usage charge.
• HB 1334 (Pollet, D-36) - raises the property tax growth limit
• HB 1870 (Zahn, D-41) - allows counties to impose a new property tax
• HB 2116 (Bergquist, D-11) - increases schools’ local levy property tax ability by raising the cap on the max value a home can be taxed for school purposes.
• HB 1840 (Peterson, D-21) - allows counties to impose a local real estate excise tax.
• HB 2027 (Berg, D-44) - imposes a new real estate transfer tax of up to 3% on the sale of certain homes.
• HB 1702 (Wylie, D-49) - allows counties to impose an additional 3% tax on utilities. 
• HB 2046 (Berg, D-44) - capital gains.
• HB 1607 (Stonier, D-49) - adds a 10-cent per-beverage container tax.
• SB 5576 (Lovelett, D-40) - imposes a new sales tax on Airbnb, VRBO, and other short-term rentals homes.
• HB 2442 (Berg, D-44) - allows counties and cities to impose additional excise taxes on real estate sales (up to 0.25%), Expands existing authority for counties and cities to impose up to a 0.5% REET dedicated to affordable housing projects. New authority for counties to impose utility excise taxes (up to 3%) on utility businesses in unincorporated areas. Enables cities/counties to adopt a local sales/use tax (0.01%) to fund services such as childcare, perinatal support, youth services, workforce supports, shelter/rental help, and transportation for clients. Modifies existing local sales/use tax authority for housing needs, with priorities for affordable housing, behavioral health facilities, and related support services.
• SB 6093 (Saldaña, D-37) - creates a new state excise tax on large companies’ payroll expenses above a high-wage threshold in order to fund state services that may be adversely impacted by recent federal budget changes.   

​These proposed taxes are in addition to many other proposed taxes on goods. You can look up any of these bills online here: https://leg.wa.gov.
 
The Tacoma‑Pierce County Chamber is truly honored to support your efforts as we work to build a vibrant and resilient South Sound. Your success strengthens the foundation of our community, and with your leadership, we are not only advancing the South Sound economy—we are shaping a brighter, more promising future for all who call this region home. We are fighting for your business interests at all levels of government. ​

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Questions

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